Intro to ESOP: an Alternative Exit Strategy (RECORDED)

As Private Equity is nearing a saturation point, the field of ABA is yet again facing fundamental changes. 

 Over the past 10 years, there have been over 100 ABA Provider Organizations that have been acquired by PE or PE-backed platform companies. While the M&A activity is still at a frenzied pace, the valuations and terms of the deals have changed significantly to reflect changes in the power structure. As such, valuations have come down to somewhat rational multiples of earnings from double digits to a reasonable single digit. However, as reflected by the higher than typical PE multiples in other sectors of mid-single digits, interest in acquiring ABA Provider Organizations is still high. 

However, significant changes are taking place as the power structure shifts in favor of PE firms. 

As the hyper M&A activity is coming to a close, valuations continue to fall and the terms of the deal are structured such that the seller becomes an employee with a mandatory 2-year stay. Even more puzzling, some terms now include a portion of the sale price to be set aside in escrow with certain triggers to release the funds. As these triggers are typically tied to hitting predetermined revenue and profit increases, the role of the seller changes from being an owner to an employee - albeit with an incredibly compelling contingency - millions of dollars. 

Most clinicians have very little background in business. In the field of ABA, nearly all BCBAs pursued their BCBAs because they saw the power of ABA and became passionate about applying this technology to help change lives. Over a period of time, as BCBA-led small agencies continued to grow, owners of ABA organizations unwittingly and unwillingly became entrepreneurs. 

Regardless of the original intent of the business, it’s understandable that as BCBA owners saw their colleagues become multi-millionaires, they also began to explore the same options. Unfortunately, the impact and influence of private equity in the field of ABA have caused irreparable damage to the field of behavior analysis, the science of behavior analysis, BCBAs and RBTs who provide ABA services, and ultimately clients. Through Dr. Jon Bailey’s Ethics Hotline and his response to the thousands of emails he has been receiving BCBAs and RBTs, we are beginning to see a very gloomy picture emerge. 

 BCBAs and RBTs report by the thousands, unethical acts committed by ABA organizations - small and large alike. These range from padding hours, delivering more hours than is required to maintain clients, exploiting RBTs with unethical and sometimes illegal business practices, and most shockingly, replacing clients with severe problem behaviors with those whose conditions are much less severe. Additionally, organizational policies of limiting the driving distance to clients’ homes are resulting in clients not receiving services. 

 However, in spite of the troubling trends, there are many BCBAs who are looking to exit their business for various reasons. Some are ready to retire, some run into difficult personal situations; some are too far removed from their passion - providing client care - that their job is no longer gratifying. And there are others who are just simply tired. Regardless of the reasons and circumstances, there will always be a need for an exit strategy. More now than ever, the market has a desperate need for BCBAs to ethically exit their business, one that allows them to feel comfortable that their employees will be treated well, that their clients will be cared for, and that the mission of the organization will be carried on by people who are equally or perhaps even more passionate about carrying out the mission of the organization. --- to provide the highest quality care to as many people as possible to make the world a better place.

 An Employee Stock Options Plan (ESOP) is an alternative exit strategy that allows BCBAs who are passionate about leaving behind a positive legacy to achieve their goals. With an ESOP, the owner has the option to take the funds and exit the business altogether, or stay on as an employee or a consultant, in whatever capacity best serves the needs of the organization, for as long as they desire. 

 To many, an ESOP may appear “too good to be true.” Fundamentally, because the ESOP is overseen by an ESOP trustee who has a fiduciary responsibility to manage the ESOP, all decisions that are made by the organization serve the best interests of the company --- and its shareholders, the employees. 

WEBINAR DETAILS:

Date: February 19th, 2020

Time: Noon to 1:00 pm CENTRAL

Panelist(s):

• John Benfield, CEO
• Karen Chung, CEO

CE Eligibility: This webinar does not qualify for CEUs

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